Mat Says: Are Your Complex Structures Hiding Tax Evasion Risks?

Jersey, a leading international finance centre, is renowned for its robust regulatory framework. However, service providers, such as trust companies, law firms, and accountants, face significant risks if involved in facilitating TAX EVASION through complex structures.

Recent developments in the UK and upcoming changes to the Jersey Financial Services Commission (JFSC) handbook underscore the increasing scrutiny and potential consequences.

These are discussed below:-

The UK’s First Prosecution for Tax Evasion Facilitation [https://www.comsuregroup.com/news/after-8-years-the-uk-is-prosecuting-its-first-failure-to-prevent-ftp-tax-evasion/]

• In August 2025, HM Revenue & Customs (HMRC) initiated its first corporate prosecution under the Criminal Finances Act 2017 for failing to prevent the facilitation of tax evasion.
• The case involves a Stockport-based accountancy firm accused of enabling a research and development (R&D) credits repayment fraud.
• This landmark prosecution highlights the UK’s intensified enforcement of strict liability offences, where companies can face unlimited fines if their representatives facilitate tax evasion without adequate prevention measures in place.
• For Jersey service providers, this serves as a stark reminder of the extraterritorial reach of the Criminal Finances Act 2017.
• The Act applies to both UK and foreign tax evasion, meaning Jersey-based entities could be liable if their employees or agents facilitate tax evasion with a UK nexus, even if the activity occurs offshore.

Risks of Facilitating Tax Evasion Through Complex Structures (https://www.ciat.org/Biblioteca/DocumentosTecnicos/Ingles/2023-Trust-Latindadd-norad.pdf)

• Complex structures, such as multi-jurisdictional trusts or corporate arrangements, are often legitimate tools for tax planning. However, they can be misused to obscure beneficial ownership or conceal taxable income, increasing the risk of tax evasion facilitation.
• Further, there is substantial evidence that complex structures—such as layered corporate entities, trusts, and offshore arrangements—can facilitate tax evasion. Multiple studies and government reports have highlighted how complexity can obscure beneficial ownership, enable profit shifting, and hinder enforcement.
  • Complex ownership chains often obscure beneficial ownership, making it difficult to trace who ultimately controls assets.
  • These structures are frequently used to facilitate illicit financial flows, including tax abuse, money laundering, and corruption.
  • The report cites examples like circular ownership, nominee shareholders, and bearer shares as mechanisms that hide ownership and control
  • Multinational enterprises (MNEs) with more complex ownership structures are significantly more likely to report zero profit in high-tax jurisdictions.
  • The study found that only complex MNEs exhibit patterns consistent with aggressive tax avoidance
  • Complexity enables profit shifting through:
  • Transfer pricing manipulation
  • Debt shifting
  • Use of tax havens and conduit entities
  • HMRC acknowledges that complex offshore structures are used to hide income and assets, making enforcement difficult.
  • The UK government is investing in data and enforcement to tackle serious offshore non-compliance, including fraud by wealthy individuals and corporates using these structures.
  • The Register of Overseas Entities was introduced to improve transparency around UK property ownership via offshore structures.
  • Trusts and other complex structures are used to evade taxes through opacity and asset isolation.
  • Discretionary trusts, in particular, allow individuals to avoid creditor claims and tax obligations.
  • The report proposes regulatory reforms to improve transparency and oversight
  • HMRC has worked with US and Australian tax authorities to analyse data revealing extensive use of complex offshore structures to conceal assets.
  • Over 100 individuals and 200 UK advisers were identified as involved in potentially abusive arrangements.
• Tax Justice Network (2022)
• EU Tax Observatory (2023)
• HMRC Policy Paper (2024)
• CIAT Report on Trusts (2022)
• HMRC & International Collaboration
• Key risks for Jersey service providers include:
• Criminal Liability: Under Jersey’s Proceeds of Crime (Jersey) Law 1999, the offence of "Failing to Prevent Money Laundering" (introduced in June 2022) mirrors the UK’s approach, imposing strict liability on entities that fail to implement adequate systems to prevent financial crime. Facilitating tax evasion could lead to investigations, fines, or Deferred Prosecution Agreements (DPAs), as seen in the case of Afex Offshore (Jersey) Limited, which faced a £408,240 penalty in 2025 for AML failures.
• Reputational Damage: A tax evasion investigation can severely damage a service provider’s reputation, eroding client trust and attracting regulatory scrutiny from the JFSC or international authorities.
• Regulatory Penalties: The JFSC’s Statutory Notice on Senior Management Functions (effective March 2023) holds senior managers personally accountable for significant breaches of AML or tax compliance regulations, with potential fines or restrictions on holding senior roles.
• Increased Costs: Defending against investigations or prosecutions is costly, especially given the evidential complexity of proving criminal tax evasion and its facilitation.  

Forthcoming JFSC Handbook Changes [https://www.comsuregroup.com/news/comsure-observation-note-on-jfsc-consultation-on-proposed-enhancements-to-the-amlcftcpf-handbook/]

• The JFSC’s AML/CFT/CPF Handbook, updated in September 2023, is set to introduce guidance classifying complex structures as higher risk for money laundering, terrorist financing, and proliferation financing.
• This change will require supervised persons (e.g., trust companies, accountants, and lawyers) to apply enhanced due diligence (EDD) measures when dealing with complex or opaque structures.
• These updates will likely include:
• Enhanced Risk Assessments: Service providers must conduct thorough risk assessments to identify tax evasion risks in complex structures, such as those involving multiple jurisdictions or nominee arrangements.
• Stricter CDD Requirements: Enhanced customer due diligence will be mandatory, including verifying the source of funds and beneficial ownership to ensure compliance with AML/CFT regulations.
• Increased Monitoring: Ongoing monitoring of transactions and relationships will be critical to detect suspicious activity linked to tax evasion.
• These changes reflect Jersey’s commitment to aligning with global standards, such as those set by the Financial Action Task Force (FATF), and increase pressure on service providers to strengthen compliance frameworks.

⚠️ Risk Indicators in Complex Structures

• Multiple layers of ownership across jurisdictions
• Use of tax havens or secrecy jurisdictions
• Nominee directors or shareholders
• Lack of transparency in beneficial ownership
• Discretionary trusts with unclear beneficiaries

Mitigating the Risks

To minimise exposure, Jersey service providers should:

• Implement Robust Prevention Procedures: Adopt HMRC’s six guiding principles (risk assessment, proportionality, top-level commitment, due diligence, communication, and monitoring) to demonstrate reasonable measures against tax evasion facilitation.
• Conduct Regular Training: Ensure staff and associated persons understand tax evasion risks and compliance obligations, particularly for complex structures.
• Engage Expert Advice: Consult legal and tax professionals to navigate the complexities of multi-jurisdictional arrangements and ensure compliance with local and international laws.
• Maintain Documentation: Keep detailed records of due diligence, risk assessments, and compliance decisions to provide evidence of adherence to regulations.

Conclusion

• The risks of tax evasion facilitation through complex structures are significant for Jersey service providers, with potential criminal, financial, and reputational consequences. The UK’s first prosecution under the Criminal Finances Act 2017 and forthcoming JFSC handbook changes signal heightened enforcement and scrutiny. By proactively strengthening compliance measures, service providers can mitigate these risks and uphold Jersey’s reputation as a transparent and well-regulated financial centre.

NOTES:

In August 2025, HM Revenue & Customs (HMRC) launched its first-ever corporate prosecution under the Criminal Finances Act 2017 (CFA 2017), targeting the offence of failing to prevent the facilitation of tax evasion. This marks a pivotal moment in UK corporate criminal enforcement.

🔍 Case Overview

• Defendant: Bennett Verby Ltd, a Stockport-based accountancy firm.
• Charges: Under Section 45 of the CFA 2017, related to an alleged £16 million fraud involving R&D tax credits and Bounce Back loans.
• Individuals Charged: Six people, including a former director, face additional charges of cheating the public revenue and money laundering.
• Court Proceedings: All appeared at Manchester Crown Court on 7 August 2025. A provisional trial date is set for 27 September 2027.

⚖️ Legal Context

The CFA 2017 introduced two key corporate offences:

• Section 45 – Failure to prevent the facilitation of UK tax evasion.
• Section 46 – Failure to prevent the facilitation of foreign tax evasion (with a UK nexus).

These are strict liability offences, meaning:

• No need to prove intent or awareness by senior management.
• Liability arises if an associated person (e.g., employee, agent) facilitates tax evasion and the company lacks reasonable prevention procedures.

📉 Implications for Businesses

This prosecution signals a shift in HMRC’s enforcement strategy, which had previously been criticised for underutilising these powers. Key takeaways for businesses:

• Review risk assessments: Focus on high-risk areas like third-party relationships and advisory services.
• Implement reasonable procedures: Develop and enforce policies, training, and controls aligned with HMRC guidance.
• Document everything: Maintain records of compliance efforts to support a statutory defence.
• Prepare for broader enforcement: The case is seen as a precursor to the new “failure to prevent fraud” offence under the Economic Crime and Corporate Transparency Act, effective from 1 September 2025.

References

• HMRC initiates first corporate prosecution under "failure to prevent ... https://www.rpclegal.com/thinking/tax-take/hmrc-initiates-first-corporate-prosecution-under-failure-to-prevent-tax-evasion-laws/
• First UK corporate prosecution for failure to prevent tax evasion https://www.step.org/industry-news/first-uk-corporate-prosecution-failure-prevent-tax-evasion
•  Bennett Verby is the first prosecution for failure to prevent tax ... https://vinciworks.com/blog/bennett-verby-is-the-first-prosecution-for-failure-to-prevent-tax-evasion-but-wont-be-the-last/
•  https://taxjustice.net/wp-content/uploads/2022/02/Complex-ownership-chains-Reduced-Andres-Knobel-MB-AK.pdf
• Tax Avoidance and the Complexity of Multinational Enterprises https://www.taxobservatory.eu/www-site/uploads/2023/04/EUTO_WP15_Francois-Vicard_Complexity_and_tax_avoidance_April2023.pdf
• Tackling offshore tax non-compliance - GOV.UK https://www.gov.uk/government/publications/tackling-offshore-tax-non-compliance/tackling-offshore-tax-non-compliance
• Are you interested in learning about complex structures and trusts ... https://www.ciat.org/are-you-interested-in-learning-about-complex-structures-and-trusts/?lang=en
• HMRC analysing data showing extensive use of complex offshore ... https://www.pinsentmasons.com/out-law/news/hmrc-analysing-data-showing-extensive-use-of-complex-offshore-structures-to-evade-tax